Jerry Brown (D)
SACRAMENTO, Calif. (Legal Newsline)- YTB International has agreed to change its marketing practices of its largely unprofitable Web sites and stop charging $500 to recruit others into its pyramid scheme, the California attorney general said Thursday.
In August, Attorney General Jerry Brown filed a lawsuit against YTB, also known as yourtravelbiz.com, its affiliates, and founders to end what he called the company's pyramid scheme.
In a stipulated judgment filed today in Los Angeles County Superior Court, the Wood River Ill.-based company agreed to provide consumers with information "in a clear and conspicuous manner" about how difficult it is to make money by selling travel through YTB, among other things.
YTB also agreed to pay $1 million in penalties, costs, and restitution to Californian who filed complaints against the company.
"YTB falsely promised customers they could get rich quick by selling travel online," Brown said. "In reality, customers were reeled into an elaborate pyramid scheme and most never earned a dime. Today's settlement ends YTB's pyramid scheme by arming consumers with hard facts and eliminating the need to sign up for this largely unprofitable Web site."
Brown's office said YTB lured consumers into its travel business through deceptive marketing, and then charged customers $449.95 for the purchase of a Web site, and $49.95 a month to operate it.
In 2007, the annual median income for those selling travel through the company was $39.00, and only 38 percent of the company's members made any travel commissions, Brown's office said.
The settlement filing comes on the heels of YTB posting a net $1.9 million loss from operations for the first quarter of 2009 ended March 31.
In a U.S. Securities and Exchange Commission filing, the company said total revenue for the first quarter of 2009 dipped 49 percent to $21.8 million, compared to $42.7 million for the first quarter of 2008.
In 2008, the company lost a total of $4.5 million.
YTB Chief Executive Officer Scott Tomer in a statement Wednesday blamed the loss on "the difficult economic environment that has affected, and is continuing to affect, the entire travel industry."
From Legal Newsline: Reach staff reporter Chris Rizo at chrisrizo@legalnewsline.com.